Brent rises above $91 on US storm, EU growth plan

Oil futures rose nearly $1 for a second straight session as U.S. companies shut oil and natural gas production in the Gulf of Mexico as a precaution ahead of Tropical Storm Debby, even as forecasters said the storm could head north and miss the vital offshore energy facilities.

The U.S. Gulf of Mexico is home to about 20 percent of the nation's oil production.

Brent crude recovered from two consecutive weeks of losses to hit a high of $91.75 a barrel. The contract rose 41 cents to $91.39 by 0359 GMT.

U.S. crude rose 48 cents to $80.24 after rising to a high of $80.68 a barrel. The front-month contract posted on Friday its biggest weekly loss since the week to June 1.

"If we have a reprieve from the storms it's (the gain in prices is) going to be temporary," Tony Nunan, a risk manager at Mitsubishi Corp said, as onshore U.S. oil and gas production is almost equivalent to its offshore volume after a strong growth in output from shale resources.

EUROPE SUMMIT

Oil is on track to post its biggest quarterly fall since the financial crisis in 2008 as the euro zone crisis and weak growth in the United States roiled global markets and threatened to derail fuel demand while ample supply from OPEC capped price gains.

"We could be close to a bottom as it (price) is well below OPEC's target," Nunan said.

Top crude exporter Saudi Arabia wants an oil price of around $100 a barrel, its oil minister said earlier this year.

Europe moved a step towards a pro-growth policy after German Chancellor Angela Merkel agreed on Friday with leaders of France, Italy and Spain on a 130 billion euros package to revive growth, but resisted pressure for common euro zone bonds or a more flexible use of Europe's rescue funds.

Investors are closely watching a crucial European Union leaders summit later this week, bracing for disappointment but keen to put money to work on any signs of a unified and comprehensive plan to tackle the region's 30-month-long debt crisis.

"The success of the summit can probably best be measured by whether it achieves a meaningful and lasting decline in Spain's bond yields," Ric Spooner, chief market analyst at CMC Markets in Sydney, said in a note.

Investors are also watching if Saudi Arabia will reduce output to stem the recent price fall after the Organization of the Petroleum Exporting Countries agreed in mid-June to maintain the 30 million barrels per day production ceiling.

The ramp-up in OPEC output has cushioned the impact of sanctions from the United States and the European Union on Iranian crude exports, analysts said.

U.S. central bank sanctions will come into effect this week, while the European Union embargo and a related insurance ban starts July 1. These will likely be implemented as planned after talks on Iran's nuclear program stalled in Moscow.

Iran's oil exports may have fallen as much as 1 million barrels per day in June as more customers in Europe and Asia stop or scale back purchases ahead of the sanctions.

Bullish hedge funds and speculators modestly boosted their bullish bets on commodity prices for a second week, data showed on Friday.

But, Reuters market analyst Wang Tao expects Brent and U.S. crude to slip towards $70 a barrel in three months on bearish signals in technical charts. <TECH/C>

(Editing by Ed Davies and Himani Sarkar)